A maker of cloud communications software, Twilio hands developers the building blocks—programming APIs—to add messaging, voice, and email to their own apps, plus identity and authentication tools and a customer data platform called Segment. Its services power two-factor login codes, text alerts, and personalized outreach for hundreds of thousands of businesses, from tiny startups to big enterprises. Twilio's platform rests on a "Super Network" software layer that ties together global communications networks so messages get delivered smoothly.
Twilio Q2 net income reached $1.07B after a $944M tax valuation allowance release, while revenue rose 22% to $1.5B.
A $944 million tax benefit turned a steady quarter into a $1.07 billion . rose 22% to $1.50 billion and more than doubled to $84.5 million, driven by existing customer expansion and pass-through carrier fees that also pushed down to 48.4%. The underlying business is generating consistent operating profit, but the headline net income figure is a one-time accounting event, not a change in operations.
Key takeaways
attributable to common stockholders reached $1.07 billion, up from $22.4 million a year earlier, driven almost entirely by a $944.1 million income tax benefit from releasing a significant portion of the U.S. valuation allowance on deferred tax assets.
rose 22% to $1.50 billion, with improving to 116% and $71.1 million coming from incremental A2P fees passed through from U.S. carriers at zero .
Section summaries
Management's Discussion and Analysis
Twilio Q2 FY2026 revenue grew 22% to $1.5B driven by existing customer usage and A2P fee pass-throughs; net income surged on a $944M tax valuation allowance release.
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Total rose 22% to $1.50B, fueled by increased existing customer usage (DBNE of 116%) and $71.1M from incremental A2P fees passed through from U.S. carriers.
declined 0.6 points to 48.4% as those pass-through A2P fees added equal amounts to and cost of revenue, creating a margin .
rose 128.6% to $84.5 million, though it fell 21.5% from Q1's $107.7 million, as operating expenses increased 13% to $641.3 million, including a $32.8 million loss on prepaid assets from two network service providers facing operational and financial challenges.
reached $352.6 million, or 24% of , and the company repurchased $66.0 million of stock, leaving $826.0 million under its $2.0 billion authorization.
What changed
The Q1 2026 watch item on materialized: margin fell to 48.4% from 48.6% in Q1 as A2P fee pass-throughs continued to weigh on the rate.
of $84.5 million did not hold the $107.7 million Q1 level, declining 21.5% sequentially due to a $32.8 million on prepaid assets and a 13% rise in operating expenses.
Management's stated possibility of releasing a significant portion of the U.S. in 2026 was realized this quarter, producing a $944.1 million tax benefit that drove to $1.07 billion.
The continued to improve, reaching 116% from 114% in Q1 2026 and 108% for full-year 2025, signaling sustained existing-customer usage growth.
What to watch
Q3 2026 to see if A2P fee pass-throughs and the $32.8 million prepaid asset signal broader network service provider cost pressure beyond the 48.4% Q2 level.
Q3 2026 to see if it recovers from the Q2 sequential decline after the one-off charge, and whether the 5.6% expands toward the 7.7% Q1 peak.
Any further release of the remaining U.S. and its effect on future .
Remaining $826.0 million capacity against $993.2 million and of $352.6 million.
grew 20% to $725.9M, but dipped to 48% from 49% as the A2P fee pass-throughs added equal amounts to and cost of revenue, creating a margin .
Operating expenses increased 13% to $641.3M, including a $32.8M on prepaid assets from two network service providers facing operational and financial challenges.
attributable to common stockholders reached $1.07B, up from $22.4M, primarily due to a $944.1M income tax benefit from releasing a significant portion of the U.S. on .
was $352.6M (24% margin), and the company repurchased $66.0M of stock in Q2, with $826.0M remaining under its $2.0B authorization.
Refer to Note 10(b) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of our current material legal proceedings.
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Refer to Note 10(b) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of our current material legal proceedings.
Macroeconomic headwinds, competitive pressures, and reliance on third-party infrastructure pose material risks to Twilio's usage-based revenue model.
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Macroeconomic uncertainty and tariffs may depress customer spending and usage, directly impacting the majority of that is usage-based.
Rising A2P messaging fees from major U.S. mobile carriers create a specific, ongoing on gross margins.
Intense competition from larger, well-resourced players and low-cost alternatives could force price reductions and erode market share.
The business depends heavily on third-party infrastructure like AWS and network service providers, exposing it to service disruptions and cost fluctuations.
Evolving AI technologies introduce new operational risks, including potential for autonomous agent errors and increased regulatory scrutiny.
Substantial $1.0 billion debt load and reliance on volatile may limit financial flexibility and ability to sustain profitability.